Fed advances discussion on exit strategy - FOMC minutes

WASHINGTON, July 9 (Reuters) - The Federal Reserve has begun
detailing how it plans to ease the U.S. economy out of an era of
loose monetary policy, appearing near agreement on a
three-pronged strategy to manage interest rates in the future,
according to minutes of the last Fed policy meeting.

The minutes from the June 17-18 meeting indicate the Fed
envisions using its overnight repurchase agreements in tandem
with the interest it pays banks on excess reserves to set a
ceiling and floor for its target interest rate.

Though no decisions have been announced, the discussion has
become detailed enough for Fed officials to contemplate the
proper spread between the two - mentioned in the minutes as 20
basis points.

The Fed's massive stimulus has flooded financial markets
with cash and stifled daily participation in the traditional Fed
funds market. The new reverse repo facility, which remains in
test phase but is expected to be formally adopted, is designed
to control cash held by money market funds and mortgage agencies
that can't deposit money with the Fed, not just banks.

Raising or lowering the interest on excess reserves can
encourage or discourage banks from holding money at the Fed.
(Reporting by Howard Schneider; Editing by Paul Simao)